Importance of Vendor Audit for your Start-Up

Last three years have been very difficult for start-ups. It has been a tight- rope walk for founders to run their startups, cut costs, show profitability and raise funds.

While organizations are taking all sorts of measures to sail the boat through these tough times, it’s been hard. The recent downround of #Pharmeasy and many more to come is only amplifying the grim situation.

One of the most common measures organizations take to cut costs is to let go of employees, make systems and processes lean. However, an important area which is often neglected is the cost vendors bring to the system. 

Let’s take an example, even a series A funded startup will have 20-30 vendors or agencies working with them. Series B, the number could be up to 75+ and so on. The larger the organization, the more the number of vendors could be.

Therefore, a proactive vendor management and vendor audit becomes a crucial part to run your organization profitably and efficiently.

Here are some advantages of conducting a Vendor Audit on a periodical basis.

Cost savings: Vendor audits help identify opportunities for cost optimization, such as negotiating better pricing, improving efficiency, or streamlining processes. Additionally, By assessing the financial stability and operational efficiency of vendors, businesses can minimize the risk of disruptions, delays, or non-compliance issues that could result in financial losses.

Compliance verification: Vendor audits assess whether vendors comply with relevant laws, regulations, certifications, and industry standards. This is particularly important in industries with strict regulatory requirements, such as financial services, pharmaceuticals, food and beverages, or manufacturing. By ensuring compliance, businesses can reduce legal and regulatory risks and maintain the integrity of their own operations.

Relationship management: Vendor audits provide an opportunity for businesses to engage with their suppliers and vendors on a deeper level. It establishes a framework for open communication, collaboration, and shared understanding of expectations. This helps build stronger relationships based on transparency, trust, and mutual goals, leading to improved cooperation and problem-solving.

Continuous improvement: Vendor audits often uncover areas for improvement in a vendor's processes, systems, or performance. By providing feedback and recommendations for enhancements, businesses can drive continuous improvement. This benefits both the vendor and the start-up, as it fosters innovation, efficiency, and competitiveness.

Quality assurance: Vendor audits help ensure that vendors or agencies meet the required quality standards. By assessing their quality management systems, processes, and products/services, businesses can verify the vendor's ability to consistently deliver high-quality goods or services. This reduces the risk of receiving subpar products or laidback/inefficient services and helps maintain consistent quality. 

Risk mitigation: Vendor audits help identify potential risks associated with the vendor's operations. This includes risks related to compliance, financial stability, supply chain disruptions, and reputational issues. By identifying and addressing these risks, businesses can proactively mitigate potential problems and avoid costly disruptions or negative impacts on their operations.

Overall, vendor audits contribute to improved cost optimization, supply chain management, risk mitigation, and performance optimization. They provide valuable insights and assurance to businesses, helping them make informed decisions, strengthen relationships, and drive continuous improvement.

Vendor Office is India’s first dedicated Outsourced Vendor Management firm. If you’d like to get an audit of your current vendors/agencies or hire new ones relevant to your business, get in touch with us at vendoroffice2023@gmail.com. We specialize in identifying the vendors that have prior experience in your industry and help in speeding up your agency hiring needs, ensuring stickiness at the same time.